Export exemption under section 5(3) fails where export houses are the actual buyers and exporters; wastage relief allowed.

For exemption under section 5(3) of the Central Sales Tax Act, the assessee had to be the actual exporter in substance; where goods were sold to export houses for consideration and the export houses completed the foreign sale, the assessee was not the direct exporter and the related purchases were taxable at the last purchase point. On the separate issue of processing loss, natural wastage in prawns and the difference between purchase weight and export weight were not automatically taxable, and tax was not fastened on the alleged wastage at the purchase point. The result was mixed, with the Revenue succeeding on the exemption issue and the assessee obtaining limited relief on wastage.

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Issues: (i) Whether the assessee's exports routed through export houses qualified for exemption under section 5(3) of the Central Sales Tax Act, 1956, and whether the corresponding purchases were liable to be taxed at the last purchase point. (ii) Whether the turnover deleted on the footing of wastage or non-exported quantity was nevertheless taxable at the purchase point.

Issue (i): Whether the assessee's exports routed through export houses qualified for exemption under section 5(3) of the Central Sales Tax Act, 1956, and whether the corresponding purchases were liable to be taxed at the last purchase point.

Analysis: The agreements and surrounding documents showed that the assessee sold the goods to export houses for consideration, while the export houses completed the export to foreign buyers and dealt with the foreign exchange proceeds. The service charges and licence-related payments were treated as valuable consideration, and the contractual terms indicated that the export houses were the immediate buyers and exporters in the disputed transactions. On that footing, the assessee could not claim to be the direct exporter for the purpose of exemption under section 5(3).

Conclusion: The exemption under section 5(3) was not available to the assessee for the disputed transactions, and the purchases were liable to be brought to tax as held by the assessing authority.

Issue (ii): Whether the turnover deleted on the footing of wastage or non-exported quantity was nevertheless taxable at the purchase point.

Analysis: The Tribunal accepted that there could be natural wastage in processing prawns and that the difference between purchase weight and export weight should not automatically be treated as taxable turnover. In view of the earlier view on permissible wastage and the uncertainty arising from the passage of time, the Court accepted the Tribunal's approach on this limited aspect and declined to fasten tax on the alleged wastage at the purchase point.

Conclusion: The turnover attributable to wastage or difference in weight was not taxable at the purchase point.

Final Conclusion: The revision matters succeeded on the principal exemption issue in favour of the Revenue, while the assessee obtained relief on the limited question of wastage, resulting in a mixed disposal of the connected cases.

Ratio Decidendi: For exemption under section 5(3), the assessee must be the actual exporter in substance and not merely a seller to an export house for consideration; where the export house is the contracting buyer and exporter, the transaction is not a direct export sale by the assessee.

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